SAN FRANCISCO: U.S. stocks fell sharply Tuesday to close near session lows, extending losses as investors braced for third-quarter corporate earnings reports and the International Monetary Fund cut global growth outlooks.
The Dow Jones industrial average shed 110.12 points, or 0.8 percent, to close at 13,473.53. The decline marked the Dow’s second decline in a row.
Shares of Bank of America Corp. fell late in the trading day in tandem with Wells Fargo & Co.
Late in the session, the U.S. attorney for the southern district of New York sued Wells Fargo, alleging the bank acted recklessly in issuing mortgages, worsening the collapse in the housing market. The suit follows a similar one filed recently by the New York Attorney General’s Office against JPMorgan Chase & Co.
Dow component and aluminum producer Alcoa Inc. closed up a penny at $9.13 before the release of its third-quarter results after the market close.
“Earnings season is not starting off to be a good one,” said Bruce McCain, chief investment strategist at Key Private Bank.
When the aluminum maker did report, it reported a loss, but adjusted earnings were 3 cents a share, just above Wall Street expectations.
The S&P 500 index and Nasdaq extended losses into a third day,
The S&P 500 index fell 14.4 points, or 1 percent, to close at 1,441.48.
The Nasdaq composite shed 47.33 points, or 1.5 percent, to 3,065.02.
Apple Inc. slid into correction mode, retreating more than 10 percent from its record $702.10 on Sept. 19, with the smart-phone maker closing down 0.4 percent, or $2.32, at $635.85.
“Tech is weak across the board, and we’re going into an earnings season that is going to be the toughest in three years,” said Peter Boockvar, equity strategist at Miller Tabak.
Intel Corp. was the worst performer on the Dow 30, closing down 2.7 percent, after Sanford C. Bernstein & Co. downgraded shares of the Dow component and semiconductor maker.
Netflix Inc. fell nearly 11 percent after Bank of America cut its rating to underperform. Edwards Lifesciences Corp. sank 21 percent after warning initial third-quarter sales would fall below expectations.
“We’re in the sobering-up period; last month was so euphoric, the Fed gave us everything we wanted and more, all the problems in Europe were solved, and now it’s the morning after and we realize there are still problems in Europe, and with the IMF report, maybe we’re tilting back toward recession, at least on a global basis,” said McCain at Key Private Bank.
And the fact that the U.S. presidential race seems to have tightened in recent days could also be weighing on the market. Regardless of which candidate one favors, “the public doesn’t like uncertainty over the next four years, so you tend to have a sell-off when you get close to elections,” McCain said.
The euro dropped against the dollar as German Chancellor Angela Merkel visited Athens, where she was greeted by mass demonstrations.